Correlation Between Potomac Bancshares and CBOA Financial

Can any of the company-specific risk be diversified away by investing in both Potomac Bancshares and CBOA Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Potomac Bancshares and CBOA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Potomac Bancshares and CBOA Financial, you can compare the effects of market volatilities on Potomac Bancshares and CBOA Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Potomac Bancshares with a short position of CBOA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potomac Bancshares and CBOA Financial.

Diversification Opportunities for Potomac Bancshares and CBOA Financial

0.0

Correlation Coefficient

Potomac Bancshares  CBOA Financial

Pay attention - limited upside

The 3 months correlation between Potomac and CBOA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Potomac Bancshares and CBOA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBOA Financial and Potomac Bancshares is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Potomac Bancshares are associated (or correlated) with CBOA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBOA Financial has no effect on the direction of Potomac Bancshares i.e., Potomac Bancshares and CBOA Financial go up and down completely randomly.

Pair Corralation between Potomac Bancshares and CBOA Financial

If you would invest (100.00) in CBOA Financial on December 2, 2024 and sell it today you would earn a total of  100.00  from holding CBOA Financial or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Potomac Bancshares  vs.  CBOA Financial

Potomac Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Potomac Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Potomac Bancshares is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

CBOA Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CBOA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CBOA Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Potomac Bancshares and CBOA Financial

The main advantage of trading using opposite Potomac Bancshares and CBOA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Potomac Bancshares position performs unexpectedly, CBOA Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CBOA Financial will offset losses from the drop in CBOA Financial's long position.

The idea behind Potomac Bancshares and CBOA Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.